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Thursday 04th of November 2010
November 1, 2010    

US dollar falls as markets anticipate eventful week

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by Kay Murchie

The US dollar has fallen to a fresh 15-year low today against the Japanese yen and also fell against the euro.

Many are calling this week “the busiest week in decades” as interest rate decisions are expected across the globe.

US central bank, the Federal Reserve, could be set to provide extra stimulus to strengthen the economy, when it meets this week.

The US central bank looks as if it will adopt measures to safeguard the recovery after minutes of the 21 September meeting said the Federal Open Market Committee (FOMC) was “prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate.”

There have been concerns for the US economic recovery, after rising unemployment and a sluggish recovery.

The Bank of Japan, meanwhile, brought its next rate-setting meeting forward by 10 days and will now take place on 4-5 November – taking place shortly after the Federal Reserve’s meeting.

This will leave the BoJ to respond to any measures the US central bank decides to adopt as the Japanese yen continues to strengthen against the dollar.

A strong yen weakens demand for exports and threatens the economic recovery, and as a result, the Bank has lowered its economic growth forecasts.

Meanwhile, the Bank of England will announce its decision on interest rates on Thursday. There has been speculation that the Bank may increase its quantitative easing (QE) programme.

However, recent strong data from the British economy suggests that the Bank will hold off injecting more money into the economy by way of its QE programme for the short-term at least.

Kathleen Brooks at online trading site Forex.com said: “The busiest event week in decades gets started with a weaker dollar.

“Market angst is likely to reach fever pitch this week as we lead up to no less than five central bank meetings, mid-term elections in the US and a non-farm payroll report on Friday,” she added.

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